Exploring New Frontiers in Space Policy and Property Rights
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Chapter 8
Exploring New Frontiers in Space
Policy and Property Rights
The United States has been on the cutting edge of space exploration since the
dawn of the space age and has become the world leader in commercial activity
in space. In the 20th century, the United States became the first and only nation
to send individuals to the Moon. After the end of the Apollo Program, the United
States pioneered the Space Shuttle, the world’s first reusable spacecraft. Now
American engineers have become the first to demonstrate and operationalize
the capabilities of commercial spacecraft for orbital cargo delivery, first-stage
reusability, and human spaceflight.
In the 21st century, the United States has ushered in a new era of space explo-
ration based on public-private partnerships and the success of private sector
investment in space technologies. The Trump Administration recognizes the
opportunities and benefits afforded by this new era and has advanced poli-
cies that encourage private sector innovation, collaboration with commercial
companies, and a regulatory environment more conducive to investment in
space. In doing so, this Administration is not only accelerating the development
of the today’s space industry; it is also laying the foundation for a viable space
economy that can continue to develop and expand in the coming decades.
This past year has seen historic advances in spaceflight and space policy,
even in the midst of the global COVID-19 pandemic. After the reestablishment
of USSPACECOM as a combatant command for the space domain on August
19, 2019, President Trump established the U.S. Space Force (USSF), the sixth
branch of the U.S. military, on December 20, 2019. The mission of USSF is to
organize, train, and equip space forces to “protect U.S. and allied interests
225in space and to provide space capabilities to the joint force” (USSF n.d.). In
addition, on May 30, 2020, and November 15, 2020, in major milestones for
the partnership between the National Aeronautics and Space Administration
(NASA) and the private sector, SpaceX launched a total of six astronauts from
Cape Canaveral to the International Space Station (ISS). These missions, which
represent the first commercial human spaceflights in history, are an important
step for the private sector’s role in the space economy.
In support of these achievements, the Trump Administration has advanced pol-
icies that strengthen investor confidence in the space economy to enable the
private space sector to flourish. These new policies are creating an environment
that spurs investment in innovation and encourages the responsible and sus-
tainable use of space resources. In this spirit, the Administration has released
the Artemis Accords, a practical set of principles that will create a safe, peaceful,
prosperous, and open future in space. The initial tranche of signatories to these
accords was announced on October 13, 2020, and included several other major
spacefaring nations and international partners, with more to follow.
With regard to the economic theory of property rights and the large and diverse
empirical literature on property rights, the Council of Economic Advisers
finds substantial evidence that improving investors’ expectations in a novel
economic sector—like space—increases investment in that sector, leading to
more innovation and greater benefits. The CEA estimates that private space
investment could potentially double in the next eight years, due to President
Trump’s executive actions and other enhancements of property rights in space.
M uch of the economic growth over the last five hundred years has
occurred because economic actors have forgone present consump-
tion to invest in the future. In support of this, a core tenet of the com-
mon law tradition is to ensure that future gains from investment accrue to the
entities or individuals that make the investment and take on the subsequent
risk. A fundamental role of government in this process is to set rules that create
expectations about what the future holds for investors. Property rights form a
legal and economic basis to support investment and provide a structure for the
226 | Chapter 8allocation and management of resources. Although new norms and systems
will evolve with the growth of space exploration, the institution of property
rights will be critical to encourage investment for the long-term development
of the space economy.
This chapter highlights the Trump Administration’s actions to enhance
space property rights and maintain the United States’ position on the fron-
tier of innovation and economic development in space. A cornerstone of the
Administration’s policy is to encourage private investment in partnership with
the Federal Government. The venture capital firm Space Capital estimated that
companies invested $18 billion in space activities in 2019. The CEA projects that
private investment in the space sector will reach $46 billion a year by 2028 as
a result of the policies undertaken to clarify and improve the enforcement of
property rights in space.
Property rights can be thought of as a “bundle of sticks,” with each stick
providing an aspect of the underlying rights that the owner can expect to
receive (Barzel 1997). Sticks, in this case, could refer to the ability to transfer
ownership of an asset, the right to earn income from the asset, or the right to
restrict others from performing certain acts near the asset. As more sticks are
added to the bundle, property rights are further specified, so that the owner
can form more precise expectations of the value of a given investment. As
activity has developed in space resources, new questions have arisen about
property rights in space. The current system of international agreements does
not require major changes, but it does need “carefully drafted additions and
amendments” for clarification (Hertzfeld and von der Dunk 2005, 82). Recent
actions by the Trump Administration seek to provide this clarification.
This chapter illustrates how recent U.S. space policy focuses on ensuring
certainty and predictability for private investments in opportunities beyond
Earth. The first section discusses current issues in space policy, and the second
one addresses recent policy efforts and explains how they provide enhanced
security and enforcement of property rights. The subsequent sections explain
the economics of property rights theory and review the economic literature on
how improving property rights affects investment. The chapter then projects
future investment into space activities accounting for the effect of Federal
Government policies on investment behavior. The chapter concludes by dis-
cussing the benefits of selecting the United States as the flag of choice—that
is, the country whose frameworks a business finds most desirable—for space
activity and how regulatory reform makes the market more competitive and
innovative.
Exploring New Frontiers in Space Policy and Property Rights | 227Current Issues in Space Policy
and the Space Economy
Today, most economic activity in space consists of satellites transmitting tele-
communications and remote-sensing data to devices on Earth and the rockets
launching these satellites into orbit. This orbital network of satellites has
facilitated a variety of civil and economic activity on Earth, including weather
forecasting, climate modeling, city planning, emergency response, precision
agriculture, satellite television, satellite radio, global broadband Internet, and
even app-based ridesharing services.
At this point in time, predicting some future industries in space is pos-
sible, but history suggests that anticipating all the emerging industries within
the space economy is impossible. However, we can use recent developments
in current technologies, such as in the satellite and rocket launch industries,
to hypothesize what the future of the space economy could look like. For
example, the process of mineral extraction on the Moon and other celestial
bodies may become profitable as the costs of extraction fall and innovations in
space manufacturing, habitation, and propulsion create a demand for resource
availability in space. Space-based solar power is also a possibility, because
orbiting solar panels can harness the sun’s rays before they dissipate in Earth’s
atmosphere and can generate more electricity than terrestrially based solar
panels. Finally, private companies are hoping to create a market for space tour-
ism through partnerships with the Federal Government and innovations that
lower costs, providing an experience quite literally like none other on Earth.
The beginnings of the space economy date to the mid–20th century,
when the Soviet Union sent Sputnik 1 into orbit in 1957, spurring a flurry of
investment into the space race from national governments. The National
Aeronautics and Space Administration (NASA) began operations in 1958,
sent the first American into space by 1961, and landed the first human on the
Moon in 1969. These accomplishments occurred in parallel with a number of
new United Nations treaties as countries around the globe contemplated the
prospect of widespread activity in space. Because there were few profitable
opportunities for the private sector at the time, the U.S. Government laid the
groundwork for a space economy, and the industry developed based on proj-
ects funded by taxpayers (Weinzierl 2018).
Most space activity in the 1970s and 1980s involved the launch and
operation of satellites for commercial telecommunications, reconnaissance,
and surveillance purposes. In 1974, the first satellite of the forthcoming Global
Positioning System (GPS) was launched into orbit (Pace et al. 1995). The
Department of Defense initially utilized the GPS constellation purely for mili-
tary purposes. However, in 1983, the United States announced that it would
make GPS’s standard positioning service available to the general public at no
cost. This event initiated private, civilian uses of GPS that have since led to the
228 | Chapter 8Figure 8-1. NASA Outlays and U.S. Private Investment, 2010–19
Dollars (billions) NASA outlays U.S. private investment
25
20
15
10
5
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Sources: Office of Management and Budget; Space Capital; CEA calculations.
Note: NASA = National Aeronautics and Space Administration.
creation of countless new firms, technologies, and applications. O’Connor and
others (2019) estimate that GPS has generated about $1.4 trillion in economic
benefits since being made available for civilian and commercial use.
Although governments initially funded all space activities, the private
satellite industry grew throughout the second half of the 20th century as
companies realized the market opportunity for satellite services, such as tele-
communications, broadcasting, and data transmission. More recently, private
industry has begun to offer other products and services that had been primarily
owned and operated by the Federal Government, such as space launches, crew
transportation, and remote sensing. For example, since the Space Shuttle was
retired in 2011, private companies such as SpaceX and United Launch Alliance
have provided launch services for civil, commercial, and national security
space systems. Figure 8-1 shows that nongovernmental equity investment in
U.S. space companies is rising in relation to the level of NASA outlays.
This shift from government launch vehicles toward commercial space
launch services accelerated in 2005, when NASA began the $500 million
Commercial Orbital Transportation Services (COTS) program. The COTS pro-
gram operated on fixed-price payments rather than cost-plus procurement,
which is intended to incentivize innovation and shift NASA’s role from being
Exploring New Frontiers in Space Policy and Property Rights | 229Table 8-1. Composition of Global Space Economy, 2019
Spending Percentage of
Industry Good or Service Space
(billions of dollars)
Economy
Satellite Total 270.7 74.0
Satellite ground equipment 130.3 35.6
Television 92.0 25.1
Fixed satellite services 17.7 4.8
Satellite manufacturing 12.5 3.4
Satellite radio 6.2 1.7
Launch services 4.9 1.3
Broadband 2.8 0.8
Commercial remote
sensing 2.3 0.6
MSS 2.0 0.5
Nonsatellite Total 95.3 26.0
U.S. Government’s space
budget 57.9 16.0
European space budget 12.0 3.3
China’s space budget 11.0 3.0
Russia’s space budget 4.1 1.1
Rest of world’s space
budget 4.0 1.1
Japan’s space budget 3.1 0.8
Commercial space flight 1.7 0.5
India’s space budget 1.5 0.4
Sources: Bryce Space and Technology; CEA calculations.
an owner and operator to being a customer for resupply services to the
International Space Station. This method of procurement and the use of other
contracting mechanisms have been gaining traction elsewhere in the space
industry, in an effort to decrease costs and benefit from private innovation (box
8-1). Market competition has since provided stronger incentives for innovation
than the existing government monopoly on launches. NASA estimates that the
use of commercial services for ISS resupply services alone has saved taxpayers
between $20 billion and $30 billion since 2011.
Annual estimates of the size of the space economy, incorporating both
public and private activities, range from $360 billion to $415 billion. The current
state of commercial activities still consists primarily of satellites and satellite
services with industry revenues of nearly $270 billion as of 2019, making up 74
percent of the space economy (table 8-1). NASA’s activities and procurements
still drive a large amount of economic activities across the Nation, however,
230 | Chapter 8Figure 8-2. Nongovernmental Equity Investment in Commercial
Space Companies, 2010–19
Dollars (billions)
14
U.S.
China
12
10
8
6
4 Singapore
France
Indonesia
2 U.K.
India
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Sources: Space Capital; CEA calculations.
with NASA’s overall economic impact estimated at over $64 billion for financial
year 2019 based on IMPLAN analysis. Recent technological developments will
allow new industries to mature. For example, dramatic reductions in the cost of
space launches are increasing the economic viability of private space activities
such as tourism and mining. Technologies enabling the Moon, Mars, and aster-
oid surface operations will mark critical milestones for the next generation of
space exploration. The reduced cost of access to space will broaden the set of
countries that are able to take advantage of the opportunities in outer space
and ensure benefit to people around the globe. Furthermore, in situ resource
utilization of space resources derived from celestial bodies themselves for
potable water, breathable air, and spacecraft propellant will allow longer-term
survival away from Earth’s surface. Once long-term survival in cislunar space
is viable, further explorations deeper into space will be possible. And once
technologies advance to make long-term survival viable, government policies
clarifying property rights will provide the needed framework for a flourishing
space economy.
Figure 8-2 shows nongovernmental equity investment in space compa-
nies from 2010 through 2019. Most private investment in space companies
has occurred in the United States and China, with smaller levels of investment
occurring in European and Asian economies. Investment in commercial space
companies is only a small percentage of the total space economy, but it reflects
Exploring New Frontiers in Space Policy and Property Rights | 231Box 8-1. Public-Private Partnerships for Human Spaceflight
The year 2020 has been historic for NASA, as the SpaceX Crew Dragon Demo-2
mission marked the first commercially developed crewed mission to the
International Space Station as part of NASA’s Commercial Crew Program.
NASA has emphasized the implementation of public-private partnerships
to advance space exploration through collaborations with the developing
commercial space sector. After NASA’s Space Shuttle program ended in 2011,
the United States relied on the Russian-designed and operated Soyuz space-
craft to send American astronauts into space. However, the development of
domestic commercial alternatives has allowed the U.S. government to regain
its domestic human launch capability while supporting U.S. commercial
companies.
The Commercial Crew Program, which supported the Crew Dragon
mission by providing SpaceX with development funds, also used fixed-price
contracts, with NASA working as a partner rather than supervisor. Cost
reimbursement or cost-plus contracts had been more commonly used by
NASA in the past, because technically complex and novel projects prevented
it from receiving accurate advance estimates of risk and cost. However, these
types of contracts provide weak incentives for innovation, given that any cost
savings innovation undertaken by the firm leads to lower revenues and often
incentivizes companies to increase the costs and lengths of their contracts.
Fixed-price contracts, conversely, provide strong incentives for innovation
and delivery of products or services on time and under budget. Per NASA’s
2021 fiscal year budget request, fixed-price contracting is now considered the
“first choice whenever possible” due to the incentives produced by placing
increased responsibility on contractors.
Public-private partnerships have been shown to lower the costs of
space products and services for taxpayers and to speed the growth of the
space economy. The Commercial Crew Program’s investment in the private
sector has driven innovation, efficiency, and effective manufacturing and
business techniques, and NASA has projected that it will save between $20 bil-
lion and $30 billion relative to the cost to develop its own crewed spacecraft.
After the Space Shuttle program ended, the cost to fly an American astronaut
on a Russian Soyuz rocket rose from $40 million in 2011 to about $90 million
in 2020, given that the Russians held a monopoly on crewed launch vehicles. A
SpaceX launch, by comparison, costs about $65 million per astronaut. SpaceX
is able to reduce costs through new approaches to recover and reuse its
spacecraft and launch vehicles.
In 2011, there were zero commercial launches in the United States,
because the market was dominated by international competitors that were
largely subsidized by their governments. Today, as a direct result of U.S.
Government investments in the U.S. commercial space sector, most commer-
cial space launches are conducted in the United States by companies such as
SpaceX, which employs over 6,000 people throughout the country.
232 | Chapter 8Looking to the future of public-private partnerships, NASA has been
increasingly making the ISS available to commercial research and manufac-
turing activities, as supported by the ISS National Laboratory. In addition,
NASA is allowing visits to the ISS by commercial astronauts aboard SpaceX’s
Dragon 2 and Boeing’s Starliner. Companies are expected to purchase seats
on private sector rockets for missions in low-Earth orbit and to the ISS in early
2022. These missions include opportunities for space tourism and commercial
enterprise, and represent the next step in the space economy.
In addition, NASA will rely heavily on the private sector for the Artemis
program in its mission to accomplish the next chapter in U.S. exploration of
deep space: returning humans to the lunar surface by 2024. These include
contracts for the Human Landing System to take astronauts to and from the
Moon with stays lasting as long as two weeks.
the growing excitement about space companies and optimism for future
returns on investment.
Although there has been large growth in economic activity in the space
sector as a whole, a significant portion of space industry revenue is still made
up of satellite services. As illustrated in table 8-1, over 75 percent of global
spending in space is for the satellite industry, and the majority of the remainder
is government spending. The only other category that is large enough to break
out is the commercial human spaceflight industry.
Space Policy Developments
As investment and innovation grow in the space economy and we surpass new
milestones in space exploration, the United States will continue to work to
ensure the international and domestic framework for property rights in outer
space resources develops in a manner that provides certainty and predictabil-
ity for industry. Doing so will reinforce the progress the United States has made
in the space sector that, based on CEA estimates, could double investment in
space and accelerate new space technologies. Here, we first describe the main
international treaties and domestic laws that have developed since the 1950s
and provide a legal framework that supports the space economy. We then
describe the efforts of the Trump Administration to advance and execute these
agreements.
The United States is a party to four United Nations treaties on space.
The United Nations Outer Space Treaty of 1967 laid the foundation for inter-
national space law, establishing outer space as a peaceful territory, designat-
ing astronauts as envoys of humankind, and declaring that each State bears
responsibility for activities in space, “whether such activities are carried on
by governmental agencies or by non-governmental entities.” Whereas private
Exploring New Frontiers in Space Policy and Property Rights | 233entities are usually responsible for damages they impose, the Outer Space
Treaty explicitly states that the country from which the object launches or the
country that procures the launch bears responsibility for damages on Earth or
in space.
The United States also approved the 1968 Rescue Agreement, which
outlined the rescue provisions in the Outer Space Treaty requiring countries to
assist personnel when landing within national borders or in places not under
any jurisdiction, such as space. The Liability Convention, which entered into
force in 1972, clarified the meaning of “launching State” to be the country
“which launches or procures the launching of a space object” or “from whose
territory or facility a space object is launched.” The convention also defined
what “damage” consists of and outlined a diplomatic process for resolving
claims for compensation.
Finally, the United States agreed to be a party to the 1976 Registration
Convention that instructs nations to register space objects launched into orbit
or space. While the United States was a party to these four early United Nations
treaties and resolutions establishing international space law, it did not ratify
the United Nations Moon Agreement in 1979, which effectively banned private
ownership of extraterrestrial property. Many other major spacefaring nations,
including Russia and the People’s Republic of China, are not parties to the
Moon Agreement.
Domestically, the United States has gradually developed a framework of
private property rights in space through legislative and executive action. U.S.
space law was first codified in the 1958 National Aeronautics and Space Act,
which created NASA, although military space activities were already under
way within the Department of Defense. The Commercial Space Launch Act of
1984 created the process for licensing U.S. commercial space launches. The
subsequent Commercial Space Launch Amendments of 1988 encouraged com-
mercial space launches by providing Federal Government indemnification for
damages exceeding $500 million to more than $2 billion.
Moving into the 21st century, three concrete policy achievements helped
further codify property rights in space. First, the U.S. Commercial Space
Launch Competitiveness Act of 2015 established the statutory framework for
the Federal Government to permit domestic private entities to extract and use
resources in space:
A United States citizen engaged in commercial recovery of an asteroid
resource or a space resource . . . shall be entitled to any asteroid resource or
space resource obtained, including to possess, own, transport, use, and sell
the asteroid resource or space resource obtained in accordance with appli-
cable law, including the international obligations of the United States.
234 | Chapter 8The U.S. Commercial Space Launch Competitiveness Act designates how
the United States licenses and approves attempts to utilize space resources in
line with authority granted to national governments in the Outer Space Treaty.
Article VI of the Outer Space Treaty states that “activities of non-governmental
entities in outer space . . . shall require authorization and continuing supervi-
sion by the appropriate State Party to the Treaty.”
In 2020, the Trump Administration further clarified expectations and
responsibilities for commercial activities in space by enumerating the U.S.
position on property rights and laying out principles for international bilateral
agreements. In April 2020, the Trump Administration announced Executive
Order 13914, “Encouraging International Support for the Recovery and Use of
Space Resources.” This executive order announced the United States’ inten-
tion to work with international partners to ensure that commercial exploration
and the use of space resources is consistent with applicable laws. It also explic-
itly rejected the Moon Agreement, which the United States had not signed,
because it was perceived to have prevented the application of private property
rights to resources in space.
On October 13, 2020, the United States and seven partner spacefaring
nations signed the Artemis Accords, a set of principles grounded in the Outer
Space Treaty to ensure safety and avoid conflict. The principles of the Artemis
Accords are peaceful exploration, transparency, interoperability, emergency
assistance, registration of space objects, release of scientific data, preserving
heritage, space resources, deconfliction of activities, and orbital debris. The
Artemis Accords uphold that resource extraction and utilization must comply
with the Outer Space Treaty, while also affirming that “extraction of space
resources does not inherently constitute national appropriation under Article II
of the Outer Space Treaty.” The accords provide investors with more certainty
when considering other countries’ positions on resource extraction. Eight
founding member nations signed the Artemis Accords: Australia, Canada, Italy,
Japan, Luxembourg, the United Arab Emirates, the United Kingdom, and the
United States. NASA anticipates that additional countries will join the Artemis
Accords in the months and years ahead.
Taken together, these three policy developments built on past treaties
and laws to further clarify outer space property rights. The increased security
of property rights should lead to increased investment and economic activity,
as individuals are able to form expectations and plan for future returns on that
investment. As is discussed further below, the ability to make long-term plans
has many direct and indirect positive effects.
The Economics of Property Rights
A large body of economic literature demonstrates the positive effects on
investment from the initiation of policies that are similar to the space policy
Exploring New Frontiers in Space Policy and Property Rights | 235developments discussed above. The examples come from a wide range of
geographies, natural resources, and time periods. This section provides an
overview of the economic theory of property rights as well as several examples
of the theory in practice, including how it applies to the space economy.
North (1991) considers the importance of institutions for shaping and
constraining political, economic, and social interactions. Institutions guide
economic change toward more growth, decline, or stagnation, depending on
the incentive structure they enforce. Tangibly, government institutions deter-
mine and enforce property rights as rules governing the economy that shape
the competitiveness and efficiency of markets. As rules for property rights are
further specified, market participants interact with more certainty about the
benefits and costs of potential activities.
The seminal work of Demsetz (1967) outlines the economics behind the
evolution of property rights. Property rights bring clarity to people when they
are weighing potential decisions. Accordingly, the benefits to setting and fur-
ther clarifying property rights allow individuals to form more accurate expec-
tations of how the rest of society will interact and respond to their actions.
Property rights encourage an individual to undertake investments with the
understanding of which benefits will accrue to that individual.
Establishing and enforcing property rights impose costs on society, as
resources are devoted to monitoring and ensuring compliance. An individual’s
expectations are based on the understanding that the rest of society will
comply with the rights specified, but if other parties are allowed to violate
an individual’s property right without recourse, then it will be difficult to set
expectations.
As figure 8-3 shows, the optimal specification of property rights changes
as the benefits and costs change. The figure depicts the optimal specification
of property rights at two different points in time. In 1967, when the Outer
Space Treaty was signed, there were only two entities engaged in outer space
activity: the United States and Soviet Union. As access to space and other
space technologies have increased, the benefits that companies can expect
from engaging in economic activity in space have grown. These increase the
benefits of property right specification, as ensuring investors have clear expec-
tations about how benefits accrue across society will lead to higher gains from
investment.
Advances in technology that improve monitoring and enforcement will
lower the cost of further specifying property rights or adding more “sticks” to
the bundle. This decrease in the cost of enforcement, along with the increase
in the benefits from setting investment expectations, implies that the optimal
level of property rights specification should increase (as shown in figure 8-3).
The Artemis Accords, for example, are giving investors clearer guidance for how
civil space activities will be conducted and the principles that will guide gov-
ernment decisionmaking. Although the Artemis Accords do not apply directly
236 | Chapter 8Figure 8-3. Marginal Cost and Benefit of Property Rights
Specification
Cost of enforcement
1
0.9 Demand for Marginal cost of
property rights, enforcement, 1967
0.8 2020
0.7
Greater benefits from Lower cost of
0.6
internalizing payoffs enforcement
0.5
Marginal cost of
0.4 enforcement, 2020
0.3
Demand for
0.2 property rights,
1967
0.1
Xold Xnew
0
Level of property right specification
1-Jan 2-Jan 3-Jan 4-Jan 5-Jan 6-Jan 7-Jan
to the private sector, the United States is responsible, via Article VI of the 1967
Outer Space Treaty, for all individuals subject to its jurisdiction or control. In
this regard, the principles of the Artemis Accords provide clarification to com-
panies about the role of governments in space and eliminate uncertainty about
public-private interactions.
Historical Examples of Property Rights Evolution
Historical examples of the development of property rights establish that
without these extra sticks in the property rights bundle, we should expect to
see higher costs and lower benefits from investments in the space economy,
potentially hindering future developments in outer space.
The early history of oil drilling provides an example of how resources
are likely to be wasted if property rights are not established in a timely man-
ner. Until the early 20th century, oil was not considered property until it was
extracted. This led to what Libecap and Smith (2002) call extractive anarchy.
Companies drilled wells without concern for maximizing the amount of oil pro-
duced from a well, but instead sought to be the first to extract and claim owner-
ship of the oil. Oil flows from a well because of the pressure inside the reservoir;
if too many wells are drilled into one reservoir, then the pressure escapes
too quickly to push the oil in the reservoir up the well. As a result, less oil is
extracted. By 1914, the director of the Federal Bureau of Mines estimated that
Exploring New Frontiers in Space Policy and Property Rights | 237a quarter of the value of all petroleum production was being wasted due to the
race to extract oil. Further, due to oil and natural gas being found together in a
reservoir, the lower-valued natural gas was often vented into the atmosphere
to ensure that the oil was extracted and thus ownership was secured. As time
went on, the structure of property rights for oil and gas has changed to allow
for increased value to be created from investments in resource extraction.
Without clear in situ property rights for subsurface resources, space
could see a repeat of this behavior for its natural resources. Many elements
that are common in space are frequently used in important technologies.
Iron, aluminum, and titanium are elements critical to the production of elec-
trical components. Silicon is a raw material for solar panels and computers.
Extracted water can be broken down into hydrogen and oxygen to meet a
variety of needs—oxygen is breathable, recombining hydrogen and oxygen
generates electrical power, and liquid hydrogen and liquid oxygen can serve as
propellants (Butow et al. 2020). Though it may sound futuristic, we can imagine
a situation where mining expeditions recklessly extract resources from various
celestial bodies, severely depleting the deposit of resources and diminishing
the returns on future investment in mining. Therefore, defining property rights
now to ensure the responsible use of resources in space could lead to future
higher levels of demand and investment in exploration and a more sustainable
space economy.
A similar story emerges for mineral rights in Nevada during the 19th cen-
tury (Libecap 1978). As new deposits of minerals were found, especially those
deposits further underground requiring increased investment for extraction,
the specification and enforcement of property rights increased. One of the larg-
est deposits in Nevada, the Comstock Lode, was discovered while Nevada was
still a Federal territory. Property rights for discoveries on Federal lands were
lacking at the time, so citizens created a series of local laws and eventually
founded the State of Nevada to ensure these property rights. Libecap (1978)
shows that as deposits increased in value, local property rights specification
also increased. It may seem difficult to imagine how local property rights would
be formed in space as in territorial Nevada, given the lack of settlements in
space. However, this history implies that it is important to set these rules as
economic actors spend extended time in space in order to maximize the future
investment in the space economy.
Investment Responses to Property Right Enhancement
All the space policy developments discussed above have improved the ability
of investors to set expectations for the manner in which benefits flow from
investments in space. The historical examples given argue that further specify-
ing property rights will bolster investment in the space economy. Increased
investments in the space economy will lead to advances in space technology.
In this subsection, we discuss the economics literature that addresses the
238 | Chapter 8effects of setting and strengthening property rights on both investment and
economic growth. The research presented here aims to convey that the ben-
efits for economic activity from improved setting of expectations that clarifies
property rights is universal and not just due to specific circumstances of time
and/or place.
Losses from short-term decisionmaking. A growing concern for future
space exploration activities arises from a lack of property rights security lead-
ing to short-term decisionmaking, which may inhibit long-term human activity.
Many empirical studies show that insecure property rights lead to investment
decisions with lower values. Many of these studies have come from analyses
of water rights in the western United States. In what is known as the Prior
Appropriation Doctrine, water rights are handed out based on a “first in time,
first in right” principle. Given that the amount of water available changes each
year due to precipitation patterns, water rights holders that were, earlier in
time, known as senior rights holders are more likely to receive their water
allocation each year than those that were later in time, known as junior rights
holders.
Leonard and Libecap (2019) argue that the Prior Appropriation Doctrine,
with its clear rights for senior rights holders, allowed for investment in irriga-
tion technologies. Given the climate of the western United States, large-scale
investment in irrigation is required to maximize the productivity of large
swaths of land. Leonard and Libecap estimate that 16 percent of western
States’ income in 1930 is attributable to investments made in irrigation that
would not have occurred without secure property rights.
Another concern with insecure property rights is that owners of natural
resources rush to extract them to ensure that they accrue the benefits of their
investments. This rush to extract resources has a detrimental effect on the
value obtained from those resources and other negative spillover effects on
society. One example is the increase in the rate of deforestation that occurs
when property rights for the land are insecure (Bohn and Deacon 2000).
Ferreira (2004) finds that those countries with clearly defined property rights
experience less deforestation than those with weaker protections. Kemal and
Lange (2018) find that a reduced chance of oil well expropriation in Indonesia
lowered the rate of extraction by up to 40 percent.
If short-term decisionmaking prevails in the initial incursions into space,
the future of the space economy could be seriously harmed. Depleting the
resources necessary to sustain life in space would mean having to transport
these resources from Earth at a prohibitive cost and complexity. Therefore,
protecting and responsibly using the resources available in space is more effi-
cient in the long term. If done prudently, establishing property rights in space
could diminish the risk of short-term decisionmaking and strengthen the abil-
ity of humans to receive benefits from space.
Exploring New Frontiers in Space Policy and Property Rights | 239Enhanced investment and asset value. Frameworks such as the U.S.
Commercial Space Launch Competitiveness Act and the Artemis Accords
enhance property rights by providing clear expectations of the benefits one
can receive from their investment and providing a list of principles that partner
nations will follow as a way to encourage economic activity in space. One
branch of the economics literature uses legal or legislative decisions that
enhance or diminish property rights to determine how investment and asset
values respond to a change in property rights specification. We discuss this
literature here. Later in the chapter, we apply the conclusions of these studies
to estimate the value of enhancing property rights in space.
Alston and Smith (2020) measure the effect of uncertain property rights
resulting from the manner in which Northern Pacific Railroad’s land grants
were structured. The Federal Government provided generous land grants
to railroad companies in hopes of ensuring the quick buildout of rail infra-
structure. Northern Pacific was granted almost 16 percent of the land area in
Montana, a State that requires coordination among its farmers and ranchers
to irrigate any tract of land for productive use. Delays in the completion of the
rail line in the 1870s led to uncertainty as to whether Northern Pacific owned
(and could sell) land in its land grant or whether the land was the property of
the Federal Government.
As a result of this uncertainty, completed irrigation projects averaged
delays of four years, while investment in irrigation projects decreased by 28
percent. Insecure property rights affected the landowners whose rights were
secure, because irrigation projects often require coordination among many
parcels due to their high capital costs. The delay in undertaking irrigation
investments led to these landowners being more junior water rights hold-
ers and, subsequently, holding less secure water rights. In total, Montana’s
economic activity was 6 percent lower in 1930 as a result of these insecure
property rights.
Grainger and Costello (2014) compare the value of more secure prop-
erty rights for fisheries in the United States, Canada, and New Zealand. New
Zealand’s regulations on quotas to operate in a given fishery explicitly state
that these quotas are a property right, yet similar quota systems in the United
States and Canada have regulations that explicitly state that the quotas are not
property rights. The fact that the United States’ and Canada’s fishery quotas
are not as secure as New Zealand’s quotas leads to a lower perpetuity value of
the quotas relative to their current annual value. Because U.S. and Canadian
firms have the potential for their quotas to be taken away without recourse,
their assets have lower values relative to New Zealand’s firms. In an additional
analysis, Grainger and Costello (2014) show that the increased security of
property rights with the settling of an ownership dispute between native New
Zealanders, known as the Maori, and New Zealanders of European descent
improved the perpetuity value of fishing quotas by 50 percent. Ensuring that
240 | Chapter 8property rights will be honored is very important for market participants in
understanding the value of their asset.
Galiani and Schargodsky (2010) use a court case in Argentina to esti-
mate the effect of secure property rights for one’s home on household deci-
sions. Their results show that households that gained secure property rights
increased their investments in the home structure. Investment in walls and
roofs increased by 40 percent and 47 percent, respectively, as a result of
households being granted title to the home. Though not directly related to
space assets, the available evidence demonstrates that more secure property
rights lead to other spillover benefits that are not directly related to the assets
on which a property rights are granted. Galiani and Schargodsky (2010) find
that when households had increased property rights security, they increased
investment in their children’s education. Children in households who obtained
the secure property rights on their land achieved an extra 0.7 year of schooling
on average. This is an important spillover effect given the large individual and
societal benefits of extra years of education (see chapter 7 of this Report).
Telecommunications satellites orbiting Earth provide an example of posi-
tive spillovers from ensuring secure property rights in space. The International
Telecommunication Union (ITU) is an organization that standardizes rules and
regulations for a wide range of communications. Through the ITU, the United
States was able to operate satellites that used specific frequencies to transmit
information to Earth, thereby allowing companies to invest in utilizing those
signals for commercial purposes. Communications satellites in geosynchro-
nous orbit rely on the ITU to secure access to specific orbital slots as well as
specific frequencies.
Protection against expropriation. A number of nongovernmental organi-
zations produce indices that measure property rights protections or general
institutional quality. The indices attempt to quantify the relative level of
property rights characteristics, such as the rule of law or protection against
expropriation risk, that are consistent across countries and time. A large body
of economics literature uses these country-level indices of institutional quality
to determine the extent to which improvements in property rights enforcement
affect economic outcomes. Policies initiated under the Trump Administration
would likely alter these indices in a measurable way if there were a property
rights index for space.
Seminal work by Acemoglu, Johnson, and Robinson (2001) shows that
improving the enforcement of property rights, in this case property rights that
protect against expropriation risk, has large effects on gross domestic product
(GDP). In their analysis, the authors show that a one-unit improvement in the
protection against expropriation risk would lead to more than doubling GDP
per capita 10 years later.
Similar results are found when researchers examine specific industries.
For example, Cust and Harding (2020) show that firms drill for oil twice as
Exploring New Frontiers in Space Policy and Property Rights | 241often in countries with stronger property rights enforcement relative to their
neighbors with weaker property rights. They also show that the effect of the
enforcement of rights is most important for private international oil companies
relative to national oil companies, highlighting the important role of stronger
rights for harnessing private investment. Bohn and Deacon (2000) find a similar
pattern for the effect on oil drilling as property rights security improves, with a
30 percent increase in security leading to a 60 percent increase in drilling per
year.
Some changes in property rights enforcement come through improve-
ments in technology. Hornbeck (2010) uses the invention and widespread use
of barbed wire as a technology advancement that reduced the costs of enforc-
ing property rights in agriculture. Importantly, Hornbeck compares areas that
had access to timber for wooden fences with those that did not and finds a 23
percent relative improvement in crop productivity when barbed wire came
into use, as barbed wire lowered the relative cost of fencing. Most of the gain
came from farmers altering the type of crop that they planted once they were
confident that livestock would not destroy the crop. This increased ability to
effectively enforce property rights led to investments that increased the total
area of farmland that had been improved by 19 percentage points, while also
increasing land values. In many ways, this example of marking off territory is
similar to the Artemis Accords’ “Deconfliction of Activities” Principle. This prin-
ciple prescribes setting “safety zones” to limit harmful interference and keep
the probability of accidental loss to a minimum.
The Effects of Policies on Investment
in Space Industries
The previous section detailed the expansive literature showing that more
secure property rights increase both investment and economic activity. The
examples discussed varied across time and space, leaving little doubt that the
results are not driven by random chance; the studies as a whole reveal that the
findings hold outside specific examples. Because the examples are numerous
and varied, determining an average effect of more secure property rights on
investment is difficult. Each study concerns a particular improvement in the
security of property rights that is difficult to quantify. However, it is still a goal
of this chapter to estimate the effect of the last year’s space policy develop-
ments on future investment, given the available evidence.
Table 8-2 summarizes the effects of most of the studies discussed in the
previous section. All these effects are large in magnitude. Another data point
is the increase of investment in the space economy in the United States with
the passage of the U.S. Commercial Space Launch Competitiveness Act in 2015
relative to investments in other countries. Using the Space Capital data dis-
cussed in the second section, and the historical examples given above, the CEA
242 | Chapter 8Table 8-2. Summary of Effects of Property Rights Improvement
Timing of
Study Industry Cause Effect
Impact
Acemoglu, GDP per
Johnson, and Expropriation capita
All 10 years
Robinson risk increased
(2001) 100%
Alston and Tenure Investment
Land 5–10 years
Smith (2020) uncertainty delayed
Bohn and Investment
Expropriation
Deacon Oil increased Immediate
risk
(2000) 100%
Cust and Investment
Harding Oil Expropriation increased Immediate
risk
(2020) 200%
Galiani and Investment
Tenure
Schargodsky Housing increased 15 years
uncertainty
(2010) 40%
Grainger and Asset value
Tenure
Costello Fisheries increased Immediate
uncertainty
(2014) 50%
Productivity
Hornbeck
Agriculture Enforcement increased 5–10 years
(2010)
23%
Leonard and
Tenure Income 16%
Libecap Water 40 years
uncertainty higher
(2019)
Note: This table summarizes the main findings of the papers discussed in the previous
section of the main text. Each study has a different issue with property rights and the impact
on the outcomes of interest.
estimates the increase in investment in the United States due to the improved
property rights specification in 2015. Controlling for country and time period
effects, the data show a statistically significant increase in investment of 92
percent—or roughly double—in the United States since passage of the U.S.
Commercial Space Launch Competitiveness Act relative to countries that did
not improve property specification. Together, these small improvements in
the security of property rights have the potential to lead to large increases in
investment. As an approximation, the CEA assumes that these improvements
in property rights security will double the amount of investment in space. This
number is in line with the evidence that has been discussed here.
To project the effect of the enhancements of property rights security that
the Trump Administration’s policies have achieved, the CEA starts with data
from Space Capital on total private investment in space activities. Figure 8-4
illustrates the increasing rate of private investment in space activities.
The review of the literature discussed above shows that further prop-
erty rights specification leads to increased investment and further economic
Exploring New Frontiers in Space Policy and Property Rights | 243Figure 8-4. Nongovernmental Equity Investment in Commercial
Space Companies in the United States, 2010–28
Dollars (billions)
50
45
Enhanced
40
property
35 rights
30
25
20
Current
15 trend
10
5
0
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028
Sources: Space Capital; CEA calculations.
Note: Data before 2020 reflect actual investment; subsequent years are forecasts.
activity. In figure 8-4, the diverging lines from 2020 to 2028 project the expected
path of private investment as a result of policy developments in 2020.
The Space Capital data suggest that a linear projection of private invest-
ment in space would reach $23 billion in 2028, which is illustrated by the blue
dashed line in figure 8-4. However, this does not take into account property
rights enhancements that occurred in 2020 or will be occurring in the future.
Therefore, the CEA projects that private investment in space will reach $46
billion by 2028. This projection is based on a doubling of investment over the
eight-year period, which is in line with empirical estimates in the academic
literature discussed above.
Establishing rights to distant resources with the goals of incentivizing
economic development and investment has not always produced the desired
results. The above-mentioned examples demonstrate how property rights
specification and security can lead to increased investment. However, align-
ing incentives is a necessary but not sufficient condition in the short term. For
example, the leading asteroid mining companies that were supporting the
space resources language in the Commercial Space Launch Amendments Act
of 2004 have both failed, despite the benefit of positive Federal legislation. In
addition, the Deep Seabed Hard Mineral Resources Act, which was passed in
1980, established a legal system for extracting resources from the deep sea-
bed with hopes of achieving economic viability before 2000. Forty years after
the law’s passage, the deep seabed mineral extraction industry still lacks the
244 | Chapter 8technology for economical extraction and does not bolster the argument that
enhanced property rights typically unlock commercial value. Certain similari-
ties do exist with the space industry, such as the need for technological innova-
tion, the considerable distance to the resources, and some uncertainty about
the types of resources for extraction.
Moreover, the space resource extraction industry currently lacks a cus-
tomer base other than national governments, and even government demand
will not become substantive until robust human and robotic operations on
the lunar surface and elsewhere can be established. However, several key
differences would support a space resource extraction industry. First, the
commercial space industry benefits from public investment in civil space
exploration, which might result in a decreased amount of investment neces-
sary for the development of basic technologies. In addition, space exploration
and research remain a national priority for many countries, which may drive
further development of the industrial base. Moreover, space resource extrac-
tion potentially offers more valuable resources than deep sea mining (Barton
and Recht 2018).
Looking Ahead
Increased investment, flowing from the enhancement of property rights,
expands the possibilities of economic activity in space and transforms abstract
issues into real considerations for national economies, companies, and
individuals.
Flag of Choice
The origins of spacecraft and the settlement of international disputes beyond
Earth’s surface remain critical issues for space policy. The flag of choice in
commercial space activity will depend on a nation’s ability to provide the
domestic infrastructure and international support needed to spur investment
while mitigating risk. The development of a healthy space economy built on a
strong industrial base, sensible regulatory environment, and the enforcement
of property rights, along with national support in international disputes, will
ensure that the United States becomes and remains the flag of choice for
private space ventures.
Space vehicles, similar to naval vessels, are required to operate under
the laws, or “flag,” of a particular country. The process of flagging occurs when
a company incorporates itself in a country or launches from that country.
Once flagged, the vessel must abide by the flag state’s laws, which include tax
liabilities as well as labor and environmental regulations (Taghdiri 2013). The
process of selecting a flag leads companies to seek flag countries with a legal,
policy, and regulatory environment that is most favorable for their business
activities.
Exploring New Frontiers in Space Policy and Property Rights | 245The practice of finding a “flag of convenience” is one threat to maintain-
ing a functional system of space travel, because companies could opt for flags
of countries with little oversight, as is seen with waterborne vessels (Llinás
2016). Panama, for example, has become the flag of choice for ships, with more
than double the number of ships of any other country due to an easy registra-
tion process and low-cost labor. In contrast to maritime law, which places the
responsibility for redressing damages on private actors, the 1967 UN Outer
Space Treaty established that countries assume the full responsibility and risk
of spacecraft launching from their territory. This forces countries to weigh the
costs and benefits of flagging spacecraft before allowing them to launch from
their territories. Inevitably, accidents in space will occur, such as with the 2009
satellite collision between Iridium 33 and Cosmos 2251. The incident occurred
when the Cosmos 2251, a derelict satellite from Russia, collided with Iridium
33, a commercial U.S. communications satellite, and both parties placed the
blame on the other for not avoiding the collision. The United States and Russia
were able to settle the potential dispute outside the Liability Convention, but
this event highlighted the need for a predictable system for resolving disputes
in space to provide the certainty needed for long-term investment in space
ventures. Flying under the flag of the United States will provide companies
with the backing of a sovereign state with substantial diplomatic capital that is
willing to engage on their behalf, supporting a growing space economy in the
United States (box 8-2).
Incentivizing the Private Sector
The Department of Defense continues to foster partnerships with the private
sector through design competitions that award contracts to both large and
small space technology companies, and through consulting programs that
mentor small companies in competing for these contracts. These events and
programs include the Space Enterprise Consortium; the Space Pitch Day,
which awards grants to accelerate new technology; and the National Security
Space Launch, which is helping to create new engines and launch vehicles.
These partnerships help break down barriers to entry for smaller firms in this
industry, which will drive competition and innovation, while decreasing the
cost of operating within the space economy. To ensure that the United States
maintains its leadership in space innovation and remains the flag of choice for
space commerce, it must maintain a business-friendly regulatory environment
that offers streamlined permitting, encourages innovation and risk-taking, and
safeguards workers, the public, and property.
The Trump Administration has prioritized regulatory reform over the
past four years, and it continues to focus on cutting red tape in the space
sector. With regulatory authorities distributed among the Federal Aviation
Administration, Federal Communications Commission, and National Oceanic
Atmospheric Administration, the Trump Administration has made efforts to
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